- Solicitors For Business
- Solicitors For You
- About Us
- News & Events
Director Loan Accounts
In an insolvency process, an overdrawn director’s loan account (DLA) is considered a company asset and the officeholder will pursue the loan account for the benefit of the company’s creditors.
JMW has experience in negotiating and entering into settlements between directors and officeholders in regards to DLAs, as well as defending claims for disputed DLAs.
How JMW Can Help
Issues revolving around director loan accounts, particularly those involving a company entering into insolvency, can be complicated. Therefore, it is crucial you get the best possible advice and guidance on the key issues in a timely manner.
JMW regularly advises directors on their rights and options, and can help defend claims brought by officeholders. Our team includes an experienced licensed insolvency practitioner and we regularly call upon the expertise of other specialists.
The DLA Investigation Process
The officeholder will pursue the director personally in order to have the DLA repaid in full. They will consider all the transactions from the last set of company accounts to the date of liquidation or administration in order to produce an up-to-date figure. If the director is unable to repay the loan account, they may face bankruptcy.
An officeholder will investigate the circumstances in which the DLA became overdrawn and may also consider claims for preferential treatment, transactions at an undervalue and/or misfeasance claims against the director, which, in turn, may lead to director disqualification proceedings.
Even if the company has written off the DLA, the officeholder may seek to reverse the transaction and pursue the director for the money owed.
HMRC will consider an overdrawn DLA as an interest-free loan made by the company to the director and will expect the director to pay income tax on the loan.